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WACC (Weighted Average Cost of Capital) Calculator
How to Use This Calculator
To calculate your company’s WACC, enter five inputs:
Equity, Cost of Equity, Debt, Cost of Debt, and the Corporate Tax Rate.
Use market values for debt and equity — not book values — to reflect actual investor expectations. Most companies update WACC assumptions during capital planning, M&A modeling, or when interest rates shift.
Typical ranges:
- Cost of equity: 8-15% (depending on risk profile)
- Corporate tax rate: use your statutory rate or effective tax rate if known
Once the fields are filled, WACC is calculated instantly, with no spreadsheets or manual formulas.
Cost of equity is typically estimated using CAPM. Revisit WACC regularly during capital planning, forecasting, or when your financing mix or market conditions shift.
What Is WACC and How to Calculate It
WACC: The Cost of Capital
WACC stands for Weighted Average Cost of Capital. It tells you the average return your company must generate to pay for the money it uses, from both equity and debt.
For example, if your company borrows at 6% and raises equity expecting a 12% return, and your funding is split 50/50, your WACC is somewhere in the middle, adjusted for the tax benefit on debt.
WACC is the minimum return your business must hit to avoid losing value. You use it to test if an acquisition makes sense, if a new product line will pay off, or if your capital structure needs adjusting. You can also compare it against profitability ratios like ROIC to measure whether you’re creating or destroying shareholder value.
Why Both Equity and Debt Matter
Most companies don’t fund growth using just one type of capital. They combine equity and debt, and each comes with its own cost.
Equity is more expensive. Investors expect a higher return because they’re taking more risk. Debt costs less because it’s less risky for lenders, and because interest is tax-deductible.
A WACC calculator blends these two costs by looking at how much of each you use. For example, if your capital structure is 70% equity and 30% debt, then 70% of your WACC comes from the cost of equity, and 30% comes from the cost of debt (after tax). The formula applies these weights directly to the return expectations of both sources.
Your capital structure — how much debt vs equity you use — plays a key role in determining your WACC. You can track this using a financial leverage ratio to see how debt affects your average cost of capital.
WACC calculator gives you a single number that reflects your actual financing mix, not just an average, but a weighted one. When you use the calculator above, it applies these weights automatically and shows the blended rate your company must earn to justify new investments.
The WACC Formula Explained
WACC = (E / (E + D)) × Re + (D / (E + D)) × Rd × (1 – T)
Where:
- E = Market value of equity
- D = Market value of debt
- Re = Cost of equity
- Rd = Cost of debt
- T = Corporate tax rate
Breakdown:
- (E / (E + D)) × Re → the weighted cost of equity
- (D / (E + D)) × Rd × (1 – T) → the weighted after-tax cost of debt
The result is your Weighted Average Cost of Capital, your WACC calculator output – the minimum return your company needs to generate to cover the cost of financing.
WACC Example: How It Works in a Real Business Scenario
Let’s say that a mid-sized manufacturing company raises €80 million through equity and €40 million through debt. Investors want a 13% return on equity, and the company pays 5.5% interest on debt. The corporate tax rate is 25%.
Here’s how the WACC calculation works:
WACC = (80 / (80 + 40)) × 13% + (40 / (80 + 40)) × 5.5% × (1 – 0.25)
WACC = 0.67 × 13% + 0.33 × 5.5% × 0.75
WACC = 8.71% + 1.36% = 10.07%
This means the company needs to earn at least 10.07% on its investments to meet the cost of its capital. Any project or decision with a lower expected return would reduce value. Use this number as your minimum benchmark when comparing investment options or reviewing strategy.
WACC calculator is a key input in 3-statement financial models where you forecast cash flows, discount future earnings, and assess funding strategies. It acts as your baseline for comparing investment options or adjusting your capital structure.
What Is a Good WACC?
There’s no universal “good” WACC. It depends on your industry, how risky your business is, and how you fund it.
Companies in stable industries like manufacturing or retail often have a WACC between 7% and 9%. Tech companies or startups usually see numbers above 10% because investors expect higher returns.
WACC calculator helps you understand how a lower WACC means your company can raise money more cheaply, which helps increase its value. Higher WACC means capital is more expensive, and investors see more risk.
WACC changes. Interest rates, market conditions, or a shift in your debt-to-equity mix can all move it. Always look at WACC in context, and compare it over time, not as a one-off number.
How WACC Supports Strategic Finance
WACC isn’t just a finance theory. It drives the way businesses make real decisions.
In capital budgeting, WACC acts as the hurdle rate. If a project doesn’t beat it, it’s not worth the capital. Learn how this fits into a broader capital investment plan.
In valuation work, WACC becomes your discount rate in DCF models. It shapes how you value acquisitions, growth, and long-term investments. You’ll see it applied in many financial analysis tools.
When tracking performance, WACC is your benchmark. Compare it to ROIC or similar profitability metrics to see if you’re actually creating value. That’s the heart of good profitability analysis.
The WACC calculator also responds to changes in capital structure. If you take on more debt or issue new equity, your mix changes, so does your WACC.
And in planning scenarios, shifting tax rates, costs of capital, or funding weights can show how sensitive your decisions are.
Farseer for Capital Planning and Forecasting
WACC isn’t just a number. It’s built into every major financial decision you make — from budgeting and investment planning to forecasting and performance review.
Farseer helps you bring that logic into your models. You can adjust capital costs, test different equity-debt mixes, and run real-time scenarios, all without rebuilding spreadsheets. It’s the same logic behind this WACC calculator, just connected to your full planning process.
Explore how finance teams use Farseer and book a demo today.
